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On July 9, 2026, the Board of Governors of the Federal Reserve (“Federal Reserve” or “the Board”) issued a Notice of Proposed Rulemaking (“NPRM”) to update the Federal Reserve's regulation requiring supervised banks to implement anti-money laundering and countering the financing of terrorism (“AML/CFT”) programs.
The proposed changes largely align with reforms that the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) proposed on April 10, 2026 and the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”), and the National Credit Union Administration (“NCUA”) proposed the same day (together, the “April Rules”), which we covered here. Both the April Rules and the Federal Reserve NPRM, if adopted, would require banks to establish and maintain an effective AML/CFT program. “Establishing” an AML/CFT program would require the design of a risk-based program, and steps to ensure the program remains current as a bank’s risk profile evolves. “Maintaining” an AML/CFT program would require a bank to implement its program in all material respects.
The Federal Reserve NPRM incorporates key themes from the April Rules:
- An express requirement that banks engage in AML/CFT risk assessments, that banks direct more attention and resources toward higher-risk customers and activities, and that such risk assessments incorporate the AML/CFT priorities established pursuant to the Anti-Money Laundering Act of 2020;
- A requirement that an AML/CFT program include policies and procedures for ongoing customer due diligence;
- A mandate that the individual overseeing a bank’s AML/CFT program be located in the United States;
- An enforcement and supervision policy providing that, once a bank has properly established an AML/CFT program, only “significant or systemic” failures to implement the program would warrant an AML/CFT enforcement action or significant supervisory action.
Absent from the Federal Reserve NPRM are two provisions included in the April Rules regarding FinCEN’s role in AML/CFT oversight. First, both of the April Rules would require the Federal Reserve, OCC, FDIC, and NCUA to engage in a notice and consultation process with FinCEN prior to initiating any significant AML/CFT supervisory action under authority delegated by FinCEN. A goal of FinCEN’s proposed notice and consultation framework is to ensure “a consistent and holistic approach to enforcement and supervision of bank’s AML/CFT compliance programs.” See FinCEN’s Fact Sheet accompanying its April Rule. Second, the OCC/FDIC/NCUA April Rule would permit banks to share information with the FinCEN Director that relates to an existing or potential AML/CFT enforcement action or significant AML/CFT supervisory action.
Neither of these consultation or information sharing provisions appear in the Federal Reserve NPRM. This omission appears rooted in the Federal Reserve’s view of its independent supervisory authority. In the NPRM, the Board cites its independent authority under 12 U.S.C. § 1818(s) to prescribe and enforce AML/CFT program regulations, separate from FinCEN's delegated examination authority. Although the Federal Reserve NPRM does not include any requirement to consult or share information with FinCEN, the Board requests comments on whether it should adopt provisions that are similar or identical to the April Rules.
Notably, Governor Michael Barr refused to vote for the Federal Reserve NPRM. In a published statement, Bar expressed concern that the “significant or systemic” standard—terminology that remains undefined in any of the proposed rules—“may have unknown effects on the Board’s ability to effectively substantiate that a supervised institution establishes and maintains AML and CFT programs in compliance with the rule.” Barr’s dissent highlights a broader tension in the rulemaking: by raising the threshold for enforcement actions to only “significant or systemic” implementation failures without defining those terms, the proposed rules may, on the one hand, limit regulators’ practical ability to supervise a bank’s compliance with AML/CFT program requirements.
On the other hand, a lack of definitional clarity may subject a bank to various examiners’ interpretations of “significant or systemic,” undermining FinCEN’s stated goal of “consistent and holistic” supervision.
Public comments are due on or before September 8, 2026.
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